The company hired private investigators from Thompson and Clark, who infiltrated meetings and gathered information on claimants. Some were labelled "anarchists", and one was even suspected of being capable of murder.

Speaking on The AM Show on Friday, both National MP Judith Collins and Labour's Phil Twyford condemned Southern Response's approach.

Ms Collins said insurance companies like to know their claimants aren't lying, but there should have been more understanding in post-quake Christchurch.

"It certainly would be very upsetting for people if they're not expecting that somebody might turn up at some of their meetings, and I can imagine they wouldn't like this at all. This would be pretty hurtful for them.

"But the reality is insurance companies of any ilk do tend to check these things out. But we all know about the earthquakes, we all know about the genuineness of everything, so I can imagine they're pretty gutted."

Mr Twyford came down harder on the insurer, saying it was "totally unacceptable".

"It's not good enough to say 'well this is what insurance companies do'. We should be holding these people to a higher ethical standard. It's the Government. Southern Response is the Government insurance company."

Ms Collins said it was more acceptable for a Crown entity like ACC to snoop.

"If you've got someone who's 'oh look, I'm so injured I can't work' and they turn out to be building a house at the same time... and that's why they can't work - because they're actually busy - I can well get why you would be wanting to have an eye on that."

But it's a "bit odd" Southern Response would resort to spying, since the destruction of the Christchurch quakes was well-documented.

Though she served two stints as Minister of Police in the post-quake years, Ms Collins says she was not aware the spying was happening.